Question

Which one of the following best exemplifies the principal-agent problem in the employer-employee relationship? A worker takes 20-minute coffee breaks although the employer allots only 15 minutes for this purpose. A worker is on the job 50 hours per week although only 40 hours are required for promotion. A worker opts for early retirement in response to the firm's incentive plan. A worker's productivity is independent of the wage paid.

Answer 1

Answer:

The correct answer is the 1st option: A worker takes 20-minute coffee breaks although the employer allots only 15 minutes for this purpose.

Explanation: The principal-agent problem arises when agent decides to undertake different actions that those expected by the principal and stated in the relationship agreement (job contract). The first option is an example that underlies differences among agent-principal agreement on contract.